Skip to content
BOL Conferences Top Gun 23
Thread Options
#1652004 - 01/18/12 03:04 PM Time limits on returning a forged check
Tessie Offline
100 Club
Joined: Jan 2006
Posts: 155
We have a customer who had someone forge some checks on her account. She notified us about a week after it happened. We in turn contacted the police and the Bank that cashed the checks. When the cashing bank was contacted they gave us a copy of the Time Limits below. I thought the Unifrom Commercial Code set the time limit at one year. So what is the time limit on forged checks. I can't believe you only have 24 hours. How many customers check their accouts each day, especially in the case of our customer who is elderly and does not have a computer.

Time Limits on Returning a Forged Check
Answer by John Burnett, BOL Guru[/b]Guru Bios

Question: How long after a check has been paid can it be returned for forgery? What is the best way to handle the return?


Answer: If the forgery you allude to is that of the issuer's signature, the return is subject to the “midnight deadline,” which means the check has to be returned by midnight of the banking day following the day on which the check was presented for payment.

Unless your bank and the depositary bank both participate in a check clearing house with a "check fraud warranty" provision, your bank will be accountable for the amount of the check if you fail to detect the unauthorized signature and return the check by your midnight deadline.

Return to Top
Deposits and Payments
#1652010 - 01/18/12 03:08 PM Re: Time limits on returning a forged check Tessie
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 80,325
Galveston, TX
If the issuer's signature is forged, John is correct and you have the midnight deadline to contend with. Your only control would be to compare every check presented to signature cards - as was done when I first started in banking. Most banks now just assume some limited risk and no longer check for smaller items.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1652016 - 01/18/12 03:17 PM Re: Time limits on returning a forged check Tessie
Tessie Offline
100 Club
Joined: Jan 2006
Posts: 155
So the customer cannot get her money back from the bank but will have to hope she can get it from the person that forged the checks? And if she can't get the money from them she is out of luck?

Return to Top
#1652024 - 01/18/12 03:28 PM Re: Time limits on returning a forged check Tessie
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 80,325
Galveston, TX
No - she gets her money back from you. You paid the items without a proper signature. The bank is going to be the one that has to figure out how to collect on them.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1652050 - 01/18/12 03:44 PM Re: Time limits on returning a forged check Tessie
Tessie Offline
100 Club
Joined: Jan 2006
Posts: 155
Our bank is not the one that cashed the checks. The bank that did cash the checks say they don't have to do anything since she did not report it within the time limit.

Return to Top
#1652081 - 01/18/12 04:14 PM Re: Time limits on returning a forged check Tessie
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 80,325
Galveston, TX
The responsibility to ensure that the issuer's signature was not forged is directly on your bank, not the bank that cashed the check. You owe her the money, as she examined her statement and notified you of the forgery in the timely basis. You are going to get affidavits of forgery from your customer and will need to pursue the perpetrator or write off the loss. How is the bank that cashed the check suppose to know whether or not the issuer's signature was genuine? They warrant that the payee got their money not that the issuer's signature is correct.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1652082 - 01/18/12 04:01 PM Re: Time limits on returning a forged check Tessie
Skittles Offline
10K Club
Skittles
Joined: Sep 2002
Posts: 13,964
TN
No, but as the paying bank it is your responsibility to verify the signature - that's why you have a signature card. As Randy stated, few banks do that any longer except over a certain dollar amount. You will be required to refund her the money since you missed the forged signature. It's the cost of doing business.
_________________________
My Opinions Only

Return to Top
#1652690 - 01/19/12 02:53 PM Re: Time limits on returning a forged check Tessie
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,862
Cape Cod
Tasha -- this isn't anything new. The responsibility of the paying bank for knowing its customer's signature was established as a matter of English legal precedent way back in the 1700s. It's on that precedent that negotiable instruments law and the UCC of all the states are based.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#1652912 - 01/19/12 05:09 PM Re: Time limits on returning a forged check Tessie
Tessie Offline
100 Club
Joined: Jan 2006
Posts: 155
Thanks, I realize this is nothing new and sorry I am not up on all the deposit side rules and regs, but when could we have caught this? The other bank cashed the checks, by the time we see the checks, it has gone through her account. Most customers don't know something is wrong with their account until they see a statement or they get an overdraft notice. And I'm just saying the time limit seems to be a little unreasonable.

Return to Top
#1652918 - 01/19/12 04:59 PM Re: Time limits on returning a forged check Tessie
Skittles Offline
10K Club
Skittles
Joined: Sep 2002
Posts: 13,964
TN
It's very 'unreasonable' in today's standards, but not so much 40+ years ago when all items were reviewed prior to posting.
_________________________
My Opinions Only

Return to Top
#1652922 - 01/19/12 05:14 PM Re: Time limits on returning a forged check Tessie
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 80,325
Galveston, TX
My post: "Your only control would be to compare every check presented to signature cards - as was done when I first started in banking."

DS - your post: "but not so much 40+ years ago when all items were reviewed prior to posting."

Come on, I'm old, but not that old. Can we go with 30? smile
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1652982 - 01/19/12 05:29 PM Re: Time limits on returning a forged check Tessie
Skittles Offline
10K Club
Skittles
Joined: Sep 2002
Posts: 13,964
TN
I was in banking 30 years ago, but knew nothing about this (I was hired because I could type). Sure, we can go with 30 Randy.
_________________________
My Opinions Only

Return to Top
#1654073 - 01/21/12 12:55 PM Re: Time limits on returning a forged check Tessie
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Quote:
by the time we see the checks, it has gone through her account


If so, that reflects an operating choice made by your bank...if you wanted to see them in time to reverse the posting and send the item back it would be mechanically possible to do so. If you do not, you assume the risk of paying over a forged drawer's signature.

It's your bank, not the payee or the bank of first deposit, who has a copy of the drawer's signature that it could use for comparison. Your bank, like most banks, simply chose not to make the comparison.
_________________________
In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.

Return to Top
#2192607 - 09/14/18 03:06 PM Re: Time limits on returning a forged check Tessie
ineedhelp Offline
100 Club
Joined: Mar 2014
Posts: 169
Hey guys, I need your help once again. . .We are a little confused on how to handle a forged check that we have taken in on deposit. The paying bank has not notified us yet but the family has called to alert us. Here is the story. Our customer deposited 3 checks last week. The checks were on a bank from the next town over. It is my understanding that the paying bank is liable because they have the signature card and theoretically could have checked the signatures before paying those items. I know they will have to give their customer (the victim) their money back, but if they return those checks to us as the bank of first deposit, we will lose money because the fraudster which is our customer has already spent that money. What do we have to do? I thought we weren't liable because we are not the paying bank and there was no way our teller could have known that check had been forged because we don't have a signature card to compare that signature on the checks.

Return to Top
#2192612 - 09/14/18 03:15 PM Re: Time limits on returning a forged check Tessie
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,862
Cape Cod
What was forged? Was it the issuer's signature, or the indorsement. Your reference to the signature card, etc., suggests the former, and if so, the paying bank is responsible for returning the check unpaid by its midnight deadline (end of the business day following the banking day the check was presented for payment). If you get the check back as a return item and it's apparent the paying bank returned late, you should return the return as a late return and hope the other bank doesn't pull a fast one and bluff the Fed into allowing them to dishonor the late return claim.

If the paying bank tries to make a claim on your bank directly (a without-entry claim based on a breach of warranty), you can simply refuse the claim based on the fact the paying bank missed its deadline.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2192614 - 09/14/18 03:19 PM Re: Time limits on returning a forged check Tessie
ineedhelp Offline
100 Club
Joined: Mar 2014
Posts: 169
Oh ok, sounds good. Yes, you were correct. It was the issuer's signature.

Thank you!!!

Return to Top

Moderator:  John Burnett